[True Burn Finance] September 20 Market Morning Report: Bank of England keeps interest rates unchanged, China promotes continued negotiations on EU electric vehicle tariffs

The Bank of England voted 8-1 to keep interest rates unchanged at 5%, with Governor Bailey hinting that rate cuts would remain gradual. The BOE will also maintain its balance sheet reduction pace, cutting its bond portfolio by £100 billion next year.

Overnight Highlights

The S&P 500 surged on Thursday, hitting a record closing high after the Fed cut rates by 50 basis points on Wednesday and signaled further easing. U.S. Treasury yields followed stocks higher, while better-than-expected U.S. jobless claims data further boosted global risk appetite. The Bloomberg Dollar Index pared losses after stronger U.S. jobs data. The pound hit a two-year high after the BOE held rates steady. The yen trimmed losses ahead of the Bank of Japan's policy decision. Oil futures rose as the Fed's aggressive rate cut boosted risk appetite. Base metals broadly advanced, with LME copper hitting a two-month high. Gold resumed its rally after pulling back in the previous session.

International News

· The Bank of Japan will announce its rate decision today, widely expected to hold steady, with traders closely watching for hints on the next hike.

· Wall Street banks are divided on the pace and magnitude of the Fed's next rate cuts. JPMorgan, which correctly predicted the first cut, forecasts another 50-bp cut in November, pending jobs data. U.S. Treasury Secretary Yellen called the Fed's move a "positive signal," saying policy remains restrictive. Former Treasury Secretary Summers expects fewer cuts than the Fed's dot plot suggests.

· U.S. initial jobless claims fell to a May low, signaling labor market resilience despite slower hiring. The housing market struggles to regain footing, with high prices persisting despite rising supply. NAR data showed existing home sales dropped 2.5% in August to a 10-month low of 3.86 million (SAAR).

· The Bundesbank said Germany may have entered a mild recession but ruled out a severe downturn.

· Some economists expect the Fed's 50-bp cut raises chances of a similar move by the Swiss National Bank.

· Neuberger Berman's Eisman, known as the "Big Short," retracted his Trump victory prediction, now calling the U.S. election unpredictable.

· The EU warned Apple (AAPL.US) under the Digital Markets Act that it faces hefty fines unless it opens iOS/iPadOS to rivals.

· Nike (NKE.US) named veteran Elliott Hill as CEO to replace John Donahoe, sending shares up 11% after hours.

Greater China News

· As the EU prepares to vote on Chinese EV tariffs, China's commerce minister makes a last-ditch appeal in Europe. The EU agreed to continue talks on price commitments. Spain's industry minister said Europe needs China as a "strategic partner" for EV industry development.

· Typhoon Pulasan made landfall in Shanghai's Fengxian district Thursday night. Meishan port suspended empty container pickups from 4 p.m. Thursday.

· Taiwan's central bank tightened credit controls to cool housing, raising reserve requirements by 25 bps but keeping the discount rate unchanged.

· CNA: Taiwan's FSC reiterated opposition to CTBC Holding's (2891.TT) bid for Shin Kong Financial (2888.TT).

· Mercedes-Benz (MBG.GR) cut its annual forecast due to China's rapid deterioration. Skechers (SKX.US) CFO also warned about China's market outlook.

Commodities & FX

· The dollar fell in choppy trade as markets digested the Fed's 50-bp cut and dovish tilt. USD/JPY rose 0.33% to 142.73 amid BOJ hold expectations. GBP/USD hit a March 2022 high of 1.3278 after the BOE decision.

· Oil rose over 1%, extending gains as U.S. rate cuts and global inventory declines offset China demand concerns.

· Gold gained over 1%, copper hit a two-month high, and aluminum a three-month peak as the Fed's long-awaited cut weakened the dollar.

Earnings & Data Watch

· Japan BOJ Rate Decision (prior: 0.25%, forecast: 0.25%)

Source: Goldhorse Capital Extramile

Author: Terry Chow